What Is a Perpetual Future? Definition & Example

A perpetual future — usually shortened to "perp" — is a derivative that lets you take a leveraged long or short position on an asset without ever owning it and without an expiry date. It is the dominant instrument in crypto trading by volume, and it behaves differently enough from spot that the distinction matters.

Traditional futures contracts have a settlement date, which is what forces their price to converge with spot as expiry approaches. Perpetuals removed the expiry, so they needed a replacement mechanism: the funding rate. Longs and shorts pay each other periodically depending on whether the perp is trading above or below spot, which applies continuous pressure toward convergence.

The appeal is threefold. You can go short as easily as long, which is awkward or impossible with spot. You get leverage, so a given amount of capital controls a much larger position. And there is no roll — you never have to close and reopen a position to avoid expiry, so a view can be held indefinitely as long as you can pay the funding.

The costs are equally threefold, and they are the reason perps are not simply better than spot. Positions can be liquidated, so being right eventually is not enough — you must survive the path. Funding accrues continuously and on a crowded pair will dominate your trading fees. And you never hold the underlying asset, so there is nothing to withdraw, stake or use elsewhere.

Perps suit directional trading, hedging an existing spot position, and carry strategies. They are a poor vehicle for long-term accumulation, where the funding drag and liquidation risk work steadily against you.